Bloomberg News

South African Economy Expands Less Than Forecast at 1.4%

November 30, 2011

(Updates with comment from economist in third paragraph.)

Nov. 29 (Bloomberg) -- South Africa’s economy, the biggest in Africa, expanded at an annualized 1.4 percent in the third quarter, less than economists forecast, as manufacturing and mining output slumped.

Gross domestic product accelerated from 1.3 percent in the second quarter, Statistics South Africa said today in Pretoria. The median estimate in a Bloomberg survey of 20 economists was for the economy to expand 1.8 percent.

“No one was expecting a quarter-on-quarter contraction of that magnitude for mining,” said Razia Khan, head of Africa economic research at Standard Chartered Plc in London, in a telephone interview. “The limited strength that we have seen elsewhere probably isn’t going to be enough to offset this.”

South Africa is struggling to meet employment and economic growth targets as the debt crisis in Europe, which buys about a third of South African manufactured goods, pushes that region close to recession. Finance Minister Pravin Gordhan on Oct. 25 cut his growth forecast for this year to 3.1 percent from 3.4 percent, less than half the 7 percent expansion that the government says is needed to meet its target to create 5 million jobs by 2020.

The rand strengthened to 8.2777 against the dollar at 1:20 p.m. in Johannesburg from 8.3695 before the data was released. The yield on the R157 government bond, due 2015, slid 10 basis points, or 0.1 percentage point, to 6.9 percent.

Mining Slump

Manufacturing, which accounts for 15 percent of the economy, contracted for a second consecutive quarter, declining an annualized 1.9 percent in the three months through September. Mining plunged 17.4 percent last quarter compared with a contraction of 4.2 percent in the previous three months, mainly due to strikes in the industry, the statistics office said.

The Reserve Bank has kept the benchmark rate at a 30-year low of 5.5 percent this year to support growth in the face of increasing price pressures. Slower growth and a slump in investors’ risk appetite caused the rand to plunge 20 percent against the dollar this year, the worst-performer of 16 major currencies tracked by Bloomberg.

A weaker rand has added to price pressures, with inflation accelerating to the 6 percent upper limit of the central bank’s target range in October. The bank will make its next interest rate decision on Jan. 19.

“Our view is that the Reserve Bank will leave the repo rate unchanged until the first half of 2013,” wrote Adenaan Hardien, chief economist of Cadiz African Harvest Asset Management in Cape Town, in a note to clients. “With growth weak and below trend, the Reserve Bank is likely to err on the side of keeping rates loose despite upside inflation risks.”

The retail industry was the fastest-growing last quarter, expanding an annualized 6.1 percent, while the financial industry, the economy’s biggest, increased 4.5 percent, signaling that consumer spending may be rebounding.

--Editors: Gordon Bell, Nasreen Seria

To contact the reporters on this story: Andres R. Martinez in Johannesburg at; Mike Cohen in Cape Town at

To contact the editor responsible for this story: Andrew J. Barden at

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